2018 was another year of mergers in the healthcare industry. In fact, a report from Kaufman Hall claims the average M&A has a revenue of $409 million – the highest number since Kaufman Hall began keeping track 10 years ago. It also shows an annual growth rate of nearly 14 percent since the annual report began.
However, financially distressed sellers are not that involved in this figure. They are down by 1 percentage point since 2017.
Nonprofits make up a majority of these transactions actually. 76 percent of these mergers were conducted by nonprofits. However, this has been the case for a while. That percentile has nearly unchanged in the last 3 years.
In Texas and Florida is where the action is happening. Texas had eight deals in 2018; Florida had seven. On the flip side, there were a total of 16 states who had no M&A activity in the healthcare field. Many of these mergers actually took place across state lines. As far as the healthcare system is concerned, geography is more important than state borders. Many small healthcare facilities have merged across state lines to create regional hospitals and clinics. It is also common for healthcare facilities to seek mergers in more demographically diverse areas.
The major advantage of forming these regional healthcare systems is to protect themselves from future changes in the industry. A large organization has a better chance of surviving should economic shifts happen in the future. Kaufman Hall believes such a shift is happening. In fact, Kaufman Hall’s Anu Singh believes that healthcare may not resemble today’s healthcare by just 2025. He claims that the system could look totally different “from a business and a care delivery perspective.” He believes healthcare will shift away from end life care and focus more specifically on maintaining public health as a whole.
Nothing is expected to slow down in 2019. Expect to see more of these mergers in the coming months.